Alexza Pharmaceuticals' (ALXA) CEO Thomas King on Q2 2014 Results - Earnings Call Transcript

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 |  About: Alexza Pharmaceuticals, Inc. (ALXA)
by: SA Transcripts

Operator

Good afternoon, everyone, and welcome to the Alexza Pharmaceuticals 2014 Second Quarter Financial Results and Corporate Update Conference Call. [Operator Instructions] This conference call is also being recorded, and if you have any objections, you may disconnect at this time.

I would now like to turn today's call over to Mr. Mark Oki, Senior Vice President, Finance, and Chief Financial Officer at Alexza. Mr. Oki, you may begin.

Mark K. Oki

Good afternoon, and thank you for joining us. Tom King, Alexza's President and Chief Executive Officer, is also present on this call.

Today, we will review the company's financial results for the second quarter of 2014 and discuss Alexza's recent accomplishments and ongoing activities. At the end of the call, we will open the line for your questions.

I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including our ability, along with our partners, Teva and Ferrer, to commercialize products; the timing of the commercialization of products; our projected revenue and expenses; and our ability to support operations based on available cash -- capital resources. Actual results may differ materially from the results predicted, and recorded results should not be considered an indication of future performance.

These and other risk factors are more fully discussed in our quarterly report on Form 10-Q that was filed earlier today with the SEC, most particularly under the caption Risk Factors. Alexza disclaims any obligation to update or revise any forward-looking statement made on this call as a result of new information or future developments.

As a reminder, our policy is to only provide guidance on products, product candidates and corporate goals for the next 1 to 2 fiscal quarters and to provide, update or reconfirm our guidance only by issuing a press release or filing updated guidance with the SEC in a publicly accessible document. Clinical and corporate milestone guidance is as of today, August 7, 2014. Financial guidance relating to our current cash, cash equivalents, marketable securities, restricted cash and other possible sources of capital is based upon balances as of June 30, 2014.

With that, I would now like to summarize the financial information for the second quarter of 2014.

We recorded revenue of $1.5 million and $3.7 million in the 3 and 6 months ended June 30, 2014, respectively, compared to $43.6 million and $44.4 million in the same periods in 2013.

Revenue in 2014 consisted of $1 million of revenue from Ferrer, a result of the ADASUVE launch in Spain; $1.1 million of revenue related to the amortization of the upfront payments from Ferrer; and $1.6 million of product revenue for units of ADASUVE sold to Teva and Ferrer. In comparison, revenue in the first 6 months of 2013 consisted of $42.8 million of licensing revenues from Teva; $1.5 million of revenue associated with the amortization of the upfront payments from Ferrer; and $0.1 million of product revenue per unit shipped to Ferrer.

GAAP operating expenses were $12.8 million and $12.6 million in the quarters ended June 30, 2014, and 2013, respectively; and $23.8 million and $22.9 million for the 6 months ended June 30, 2014, and 2013, respectively.

Cost of goods sold consist primarily of start-up activities related to commercial manufacturing operations and to a lesser extent, manufacture of commercial product. We are in the early stages of commercialization and as anticipated, have incurred higher per unit cost associated with low production volume. All costs associated with the manufacturing process, incurred prior to the first commercial product, produced in the second quarter of 2013, were expensed as a component of research and development expense.

Research and development expenses were $4 million and $7.2 million during the 3 and 6 months ended June 30, 2014, and $4.8 million and $11 million in the same periods in 2013.

The decrease in research and development expenses in the first 6 months of 2014 as compared to the same period in 2013 is primarily due to certain expenses relating to manufacturing, supply chain and quality, being classified as cost of goods sold or inventory beginning in the second quarter of 2013.

For 2014, our research and development efforts are focused on meeting our ADASUVE European post-approval commitments, including clinical trials, advancing the clinical development of AZ-002, and moving our 2 new product candidates, AZ-008 and AZ-009, into pre-clinical predevelopment.

General and administrative expenses were $3.9 million and $7.9 million during the 3 and 6 months ended June 30, 2014, and $4.8 million and $8.9 million in the same periods in 2013, respectively. The decrease in G&A expenses was primarily due to a reduction in ADASUVE pre-commercialization efforts and activities, which were incurred during the 3 and 6 months ended June 30, 2013. Teva assumed responsibilities for these activities with the license agreement Alexza entered into with Teva in May 2013 and the NDA transfer to Teva in June 2013.

During the second quarter, we drew down the remaining $5 million against the Teva Note. We ended the quarter with cash, cash equivalent, marketable securities and restricted cash of $49.2 million. Consistent with our previous guidance, we believe we have sufficient capital resources to meet our anticipated cash needs for at least the next 12 months. This guidance is based on our cash, cash equivalent, marketable securities and restricted cash balances at June 30, 2014, as well as estimated product revenues associated with the sale of ADASUVE in the U.S., estimated milestone and product revenues associated with the sale of ADASUVE in the EU and expected cash usage.

As always, changing circumstances may cause us to use capital at a faster or slower rate than currently anticipated or to alter our operations.

I will now turn the call over to Tom for a review of Alexza's accomplishments and business and pipeline update.

Thomas B. King

Thank you, Mark, for those comments and for the summary of our second quarter financial results. Good afternoon, and thanks to all of you for joining our conference call today. In the second quarter of 2014, we continued the transition to a commercial company, noting Ferrer's launch of ADASUVE, ADASUVE in Sweden, Norway, Denmark and Finland. Additionally, as of the end of this week, ADASUVE will be launched in Guatemala. This approval and launch is especially exciting, as it represents the first ADASUVE approval in Latin America for Ferrer and Alexza. Ferrer used our ADASUVE MAA from our EU approval as the basis for obtaining approval in Guatemala, and we believe it will be the foundation for additional submissions in countries in Latin America.

In total, ADASUVE is now available in 10 countries around the world. Ferrer expects to continue to launch ADASUVE in additional European and Latin American countries in 2014 and 2015, with France being the next major country in 2014.

I would now like to summarize some of our other second quarter of 2014 accomplishments that we and our partners, Teva and Ferrer, continue to build on the momentum as we generated it over the last 12 to 18 months.

In April, Ferrer initiated sales of ADASUVE in the Nordic countries through its distribution agreement with Medivir AB. Ferrer and their distribution partners now market ADASUVE in 8 countries in Europe. During the second quarter of 2014, we shipped 27,828 total units of ADASUVE, with 23,031 units to Teva and 4,797 units to Ferrer. As we have said previously, we fully expect the next 4 to 8 quarters of ADASUVE launch to be lumpy and uneven as new countries come online, and at the same time, we work with our parties to optimize inventory in various aspects of the distribution chain.

On the production side, we initiated an effort to increase the ADASUVE production batch size from 5,000 units to 10,000 units. This work is part of a larger set of longer-term activities focused on increasing manufacturing efficiencies and attaining overall cost reductions for the unit cost of ADASUVE over time.

To date, we have manufactured 25 batches of ADASUVE in the United States and the EU market. In May, we hosted an Analyst Day in New York City. 3 U.S. clinicians and 3 EU physicians made various presentations on the treatment of agitation, the evolution of the practice of medicine in this patient population, clinical considerations in treating patients with agitation and in the case of the EU physicians, specific clinical experience with ADASUVE. It was exciting to hear this firsthand experience from these European physicians. Information regarding the content of these presentations can be obtained by contacting Alexza Investor Relations.

During the second quarter, we finalized the planning for the ADASUVE post-approval safety study, also known as PASS, and a drug utilization study, also known as DUS, clinical trials both in the EU. Both studies are part of the post-approval requirements of the EMA approval for ADASUVE. Most studies will have approximately 20 to 25 unique sites in 5 to 6 European countries. Target enrollment for the PASS study is 1,500 patients and 1,000 patients for the DUS study.

During the second quarter, we and Teva initiated a clinical trial to assess the safety and pharmacokinetics of ADASUVE at doses of 2.5-, 5- and 10-milligram in adolescents. We believe that data from this Phase I trial could provide dosing information for each of our respective follow-on efficacy and safety studies in adolescents, which are planned for the U.S. and the EU. As a side note, we also manufacture clinical trial materials for this study.

Our global ADASUVE commercialization strategy has been to secure strategic collaborations to commercialize the product, while maintaining control and primary responsibility for manufacturing. It is also important to note that the commercial strategy for the U.S. and Europe are consistent in our ADASUVE product messaging, but are distinctly different due to the market dynamics, pricing considerations, hospital and physician protocols and historical norms in these different markets.

Going forward, our goals are to, with ADASUVE, are to support the Teva and Ferrer commercial efforts, while continuing to seek strategic collaborations outside of the U.S. and Ferrer territories.

We expect that both Teva and Ferrer will establish and grow ADASUVE's market positioning by directing the various commercialization activities; which include clinician education, medical liaison work, deploying dedicated sales teams, and country-specific pricing and reimbursement strategies; along with patient advocacy. We are very pleased with the efforts on the part of our partners, Teva and Ferrer, and their continued enthusiasm in executing on their launch plans in their respective territories.

We do note the challenges of getting any product into hospitals around the world, with formulary review processes being the key rate-limiting factor in today's global hospital markets. Momentum will be built over time with continued efforts. For example, last year at this time, Ferrer had only 1 or 2 hospitals that had purchased ADASUVE. Today, this number is over 100 hospitals purchasing ADASUVE. A key piece of feedback we continue to hear from the EU physicians is that the experience they're having with ADASUVE is that ADASUVE does exactly what we learned from our regulatory clinical trials that it would do; which is a great outcome hearing direct feedback with a patient benefit just -- as initially seen in the pre-approval clinical trials.

In the U.S., the ADASUVE launch is clearly at a very early stage, but we are excited to note that a brand awareness media campaign was launched in June targeting psychiatry and emergency medicine and a speaker program to build brand awareness among physicians, led by a panel of thought leaders in psychiatric emergencies is also underway.

We believe that the primary attributes of Staccato, predictable speed of onset combined with noninvasive, orally inhaled drug delivery are well suited to treating acute conditions where speed and patient control are factors. And to that end, our next product candidate in our pipeline, AZ-002, also known as Staccato alprazolam, leverages these Staccato system attributes.

I'd like to spend some time on our pipeline. We note that we are a little behind with the start of our Phase II program for AZ-002. We have completed planning the first clinical trial with AZ-002 in acute repetitive seizures, working with key opinion leaders in the epilepsy field to finalize the protocol and our overall development strategy, and we are now in the final execution details leading to the first dose in a patient.

This first trial will be an in-clinic, randomized, double-blind, crossover -- excuse me, not crossover, evaluation in patients with epilepsy. The primary aim of this study will be to assess the safety and pharmacodynamic electroencephalographic effects of a single dose of AZ-002 at different dosing strengths. We expect data from the Phase IIa study to provide dosing information for the Phase IIb study we would expect to initiate in 2015. We look forward to updating you as we initiate this study later this year.

We are excited by our announcement of the 2 new product candidates, AZ-008 and AZ-009, a result of our 9-month process to review medical needs in major therapeutic areas. During this process, we identified a number of product concepts that align with our Staccato technology. Both AZ-008 and AZ-009 will incorporate the active pharmaceutical ingredient, ropinirole, a dopamine agonist into Alexza's proprietary Staccato system. We plan to develop AZ-008 for the acute treatment of Restless Legs Syndrome, also known as RLS, and AZ-009 for hypermobility or freezing during off periods in patients with Parkinson's disease. AZ-008 and AZ-009 may offer these 2 distinct patient populations an advantage over treatments available today.

Restless Legs Syndrome affects 2% to 3% of the adult U.S. population. RLS is characterized by restlessness in the legs, which can be accompanied by uncomfortable sensations such as leg cramps and an urge to move your legs. Symptoms start at rest and commonly worsen at night. About 80% of people with RLS have periodic limb movements during sleep, which can cause night-time arousals and reduce the quality and quantity of sleep. In an acute situation, RLS may delay sleep and can negatively effect quality of life.

We believe that AZ-008 could play a role in treating acute and episodic RLS symptoms in patients who may or may not be taking chronic treatment. Alexza believes the benefits of the AZ-008 may include this rapidly treating acute symptoms, when they occur at night; which may allow patients to calm their legs and go back to sleep. And providing acute treatment options for patients who are not yet taking chronic treatment and medications, deferring the start of their chronic maintenance therapy; which sometimes can lead to the augmentation of RLS symptoms. We believe that rapidly treating the acute symptoms could address the need in RLS patients for whom the acute symptoms can seriously impair their quality of life.

41% of the 114 physicians we surveyed in a market research study see this product candidate as the potential significant improvement over current available options in treating these symptoms.

Our third product candidate is AZ-009 for the hypermobility in Parkinson's disease patients. According to the Parkinson's Disease Foundation, as many as 1 million patients in the United States live with Parkinson's disease, which is a progressive neurodegenerative disorder that is characterized by a broad spectrum of motor and non-motor features that can have an impact on the function of a patient.

One of these clinical features is acute and intermittent hypermobility or freezing during the off period these patients have, which tends to manifest in more advanced patients.

Freezing is a form of a akinesia or a loss of movement and is one of the most disabling symptoms of Parkinson's disease. It may incur in about half of Parkinson's disease patients according to the 111 physicians we surveyed in our market research study.

Depending on the patient, it can incur anytime of the day and multiple times per day or week. Freezing most commonly affects the legs during walking and because of this, it commonly causes falls; which can cause substantial social and clinical consequences in these patients. Our interviews with neurologists who specialize in treating Parkinson's disease describe a freezing episode as unpredictable and sudden and often lasting 10 to 30 minutes. Although these freezing episodes can be mitigated by treatment with dopamine agonists, only oral and injectable treatment options are currently available for patients to treat themselves at home.

The neurologists we've surveyed, who specialize in treating these patients, have said to us that they believe AZ-009 can play a role in treating the Parkinson's disease population, that is currently underserved with the current treatments, that are available option -- or are currently available for treating freezing. According to these neurologists, speed of onset of treatment is considered crucial in these patients with these episodes, and about 50% of the surveyed physicians see this product candidate as a potential significant improvement over currently available options.

We believe that the benefits for AZ-009, including the rapid relief of freezing that occurs any time during the day, without the need for self-injecting or for waiting for the long onset of effects for oral medications, would provide a needed treatment option in this difficult-to-treat patient population, where we believe there is a general dissatisfaction with current treatment.

In closing, we have continued the transition in a commercial strategy in the second quarter of 2014. Our production facility is up and running to supply ADASUVE on a global basis. Teva and Ferrer continue their respective activities in the various launches of ADASUVE. We're getting back into the clinic with AZ-002, and have just announced AZ-008 and AZ-009 as 2 new Staccato-based product development candidates. It is truly a very exciting time for Alexza.

We look forward to updating you as we continue to make progress against our objectives to commercialize ADASUVE and to advance our product candidates through development. And as always, we fully appreciate your support of Alexza.

With that, we'd like to conclude our formal presentation and we like to open up today's conference call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from the line of Mr. Scott Henry.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

I just have a couple of questions on ADASUVE, trying to get my arms around the reporting. For starters, I see in the queue, you have royalty revenue of $4,000. Now I know that will get paid out to the nonrecourse notes, but will that contra line come in further down the income statement? How is the accounting for that royalty?

Mark K. Oki

No, that just gets booked as top line revenue. And then when the interest payments are made, it just goes out as interest expense or as we build up that number, a reduction to the principal debt.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Okay. So I can effectively take that $4,000, divide it by whatever I think the U.S. royalty rate is. And is that kind of your U.S. demand?

Thomas B. King

Yes, that would be products that were sold in the first quarter of 2013.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

And they pay royalty based on when it's sold to the patient or to the hospital?

Thomas B. King

Oh, it's not -- I guess, the correct answer, I think, is probably to the hospital.

Mark K. Oki

To the hospital.

Thomas B. King

Because the patient -- when it goes into the hospital, then it becomes a hospital asset. And to a certain degree, you never really know when it goes to a patient.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

But I imagine they have some right of return for those products. I'm just trying to think of how I should think about these numbers. And as well, when I see the product sales, which are the manufacturing revenues, is the mix between o US and U.S. -- should the units shipped be a sort of a proxy for how that mix should be?

Thomas B. King

I think the markets are distinctly different, which makes it difficult, I know. We have 6 SKUs in Europe, and we have 1 SKU in the United States. And so a lot of what you see is the lumpiness of those markets. I mean, for example, we shipped a pallet of product that's for the Nordic region, except for Denmark, it's a different SKU. And they'll draw off that palette until it's used and they'll order another pallet of product. That's the way our arrangement is set up. So you might have, nicely, growing demand on a quarterly basis in Scandinavia, but it might take them 6 to 8 quarters to consume an entire pallet. So I think we've always tried to show what we ship because it's something of -- we know, and it obviously generates revenue for us. But I think it will take a while before the units we ship translates into a demand base because the distribution schemes and the distribution mechanisms are lumpy early on, and we still don't know all of the aspects of the distribution supply chain.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Okay. Well, I guess shifting gears, and I'm still trying to kind of figure it out, but with the reporting, it's a little bit tricky. The units shipped in Europe definitely dipped down in 2Q versus 2 -- first quarter. And I think per your Q, it should kind of maintain that in Q3 and then dip again in Q4. How do you think the European launch is going from a demand basis? So are you seeing demand increase quarter-over-quarter, month-over-month? I'm just trying to get any color of how you think that European launch is going.

Thomas B. King

Well, I think it's going very well. I think the challenge is there's 2 components, I think, of the launch into a hospital market -- maybe it's that way in the outpatient market, too, we're just not as familiar about that. But you've got the time it takes to get it on the shelf in a hospital. And every country is different. And to a certain degree, every hospital is different. One of the things that Ferrer tells us, sometimes, a little bit jokingly, is if you know 1 hospital, you know 1 hospital. But there are barriers out there, and each country has its own nuance about getting the product sort of off the shelf of Ferrer and onto the shelf of the hospital. So even though a physician might have interest to use the product, they can't use it until it gets to the hospital. And then there's the real sort of product demand based on the hospital being -- or the product being used by a doctor. So when we think about sort of this bimodal distribution of uptake, it's getting it to the hospital, on the formulary through with all the processes to get it on the shelf, which can be highly variable from hospital to hospital and from country to country. Parenthetically, for example, it can be 12 to 18 months to get through the formulary process in Spain. It's just part of what hospital products do. Then once it's in a hospital, then it gets used. And so I think we see, growing from -- as I've said in my earlier comments, a year ago, we had 1 or 2 hospitals ordering. We've got more than 100 now, and it's growing at an increasing rate, which is what we'd expect to see over time. And so that's a good thing. And then I think growing at an increasing rate from the hospitals will eventually translate into growing at an increasing rate with doctors using the product, which will then hopefully have some compounding by both the increasing number of hospitals, included with the increasing number of uses per doctor at a hospital. Does that make sense, Scott?

Scott R. Henry - Roth Capital Partners, LLC, Research Division

I -- hopefully, it will over time. I mean, it's going to be confusing in these first few quarters. I don't think it's anywhere around that. But yes, if more hospitals are purchasing that, it's obviously a good thing.

Thomas B. King

Yes. And I would say also, I think it is something over time because there are natural barriers to getting in the hospital, and ADASUVE is a hospital-based product, so it's got to go through those. And then there are barriers to ADASUVE being a novel product, which is more about using it at the doctor level. And I think -- and the tactics to attract -- to attack both of those sort of aspects of getting the product used and growing are different, because you have to go through pricing and formulary, and in the United States, some REMS work to get it on the shelf. And then the promotion specific to the clinical benefits is more about the one-on-one conversation that you have with clinicians. So it's been fascinating to watch, and there are some translatable things from Europe to United States and back and forth. But to a large degree, each hospital is unique in its own setting.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Okay. Well, what would be helpful -- and I don't know if you can do this right now, but just to know how many hospitals purchased in 2Q and versus Q1? And just so we can track that metric going forward, I think would be helpful.

Thomas B. King

Right. Now I appreciate that. And those are data that are proprietary, and we always want to be clear of what we can and can't say. Those are -- they are proprietary to both Ferrer and to Teva and are not data that we have access to per se.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Okay. Understandable. Just a couple of other questions. The $7.6 million change in fair value of the contingent consideration liability, what should we interpret from that?

Thomas B. King

Yes, so the contingent liability is our estimate of the fair value of contingent payments that we would have to make to the Symphony Allegro shareholders for royalties and milestones that we received from loxapine and alprazolam. The full detail of that is laid down in our K and Q, because it's complicated, and the rationale for it and the methodologies we used to calculate it. In short, it's a net present value, of our view, of those payments that we would make to Symphony over time, based on what these products sell. And the reason it's a unique number is that if we don't sell anything, the contingent of liability goes to 0. If we do sell a thing, it is. And so it's somewhat of a projection of our view of those payments. Our model estimates the amount and timing of those royalties and milestones to be received under several scenarios and in all the territories of the world. And we apply a probability of those different sort of potential outcomes then calculate the net present value based on a discount rate at 16.5%. And our contingent liability model utilizes information based on both internal and third-party revenue projections, internal business development discussions and some of our own internal judgment. And we update it on a quarterly basis, reflecting sales, orders, Teva and Ferrer projections and some b.d. discussions, along with change in the calculation based on the time-value aspect of the net present value calculation. During the second quarter, we didn't adjust our view of the peak sales whatsoever with ADASUVE, but we did adjust the uptake curve. And our model reflects this twofold process, Scott, that I just mentioned to you, which we believe it ultimately takes to get ADASUVE product sales. The first is getting ADASUVE into the hospital, which is mostly a logistics activity; which seems to be, mostly, gated by getting ADASUVE on formulary in a hospital setting, and then the actual ADASUVE product user adoption curve; which is based on clinical trial, and the use and acceptance of the product. Mathematically, since we discount the cash flows at 16.5% rate, the reduction in the early years has a large impact on this NPV calculation. We plan to continue to review our assumptions under this, and we will do it on a quarterly basis as required. But we do expect significant swings over the next 4 to 8 quarters in this number, as we learn more about this twofold process for getting ADASUVE, both into the hospital and then tried and used by clinicians.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Okay. So what I took away from that is you expect the launch to be more gradual, but you didn't change the peak.

Thomas B. King

That's correct.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

The only other questions I had -- interest expense, that $2.2 million, is that a good proxy going forward?

Mark K. Oki

It should be until we start paying down some of the principal on the Morgan Stanley -- the royalty debt.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Okay. And then the cost of goods sold, $4.9 million, is that kind of your fixed component of manufacturing? Is that how should I think about that number?

Mark K. Oki

Yes, we -- I mean, it will just depend on, somewhat, how much we ship [ph], but it's a pretty good proxy.

Operator

Your next question comes from the line of Mr. Steve Brozak.

Stephen G. Brozak - WBB Securities, LLC, Research Division

I'll ask one question and one follow-up. It seems like a lot of questions have been asked and answered. So the one I care the most about, obviously, is whenever you're starting to go out there and begin a sales process, one of the items is the informational challenge. What can you tell us anecdotally? And what can you tell us -- having launched products in the past -- about what some of the KOLs are giving you feedback on? What are some of the areas where you would probably want to give us greater clarity and that you're learning about? And one follow-up after that, please.

Thomas B. King

Sure. So Steve, just a quick question, tongue-in-cheek here. So one question and one follow-up, is that 2 questions?

Stephen G. Brozak - WBB Securities, LLC, Research Division

No, it's 1.5 questions.

Thomas B. King

Okay. So anyway, one of the reasons we did the Analyst Day, and we've made the script or the transcript available, and that sort of thing, was trying to share some of the excitement that we hear from clinicians who have experience. I mean, I take away, having launched several products that are relatively novel, is you'd to like to hear that what you thought the product would do is actually happening. And I think that's been a very solid piece of feedback from the European clinicians. We talked about speed of onset. We talked about predictability of response and sort of that density of response. We talk about ease of administration. And all of that has come back to us, verbatim, from clinicians, from all of the countries that are now using the product. If anything, they say it works easier than they thought. I mean, sometimes you can think of a device being a bit complicated. And so I think they're somewhat surprised by the ease of use. And I think that also, if you think about our clinical data, we had statistically significant onset; measured as defined by our product at 10 minutes. And some of the clinicians are seeing that they see the impact of the product faster. Obviously, if you get to a statistically significant difference between drug and placebo by 10 minutes, you've got a lot of activity going on in that first 10-minute period of time. So clinicians are telling us that the drug works really fast and really predictably. So it's actually fun to hear those testimonials. And we have had no surprises in terms of adverse events, anything that we didn't see in the clinic. And so it gives us confidence that if we can work through the logistical barriers; which are out there for every product that goes into the hospital and get this in the hands of the docs. They will try it and they'll see the benefit that we've seen in our clinical trials, which I think is positive.

Stephen G. Brozak - WBB Securities, LLC, Research Division

And given the fact that you are seeing those benefits, and obviously, we don't live in a vacuum, there are a lot of different pharmaceutical biotech companies that, obviously, are watching your new technology, your new technology platform. Obviously, I don't want to break anything on FD, but you've gauged the landscape as to what other products -- you do have your pipeline -- are you -- or have you seen any interest from other companies to see about potential collaboration into the future given your platform? And how important it is and how much of a difference can it make in terms of drug uptake? I'll jump back out of the queue -- in -- back into the queue after you answer that.

Thomas B. King

Okay. Thanks, Steve. Well, you asked a good question. And I think as much as we always have loved our Staccato technology, up until recently, it was still just an idea. It wasn't FDA-approved, and the manufacturing process hadn't been reviewed and the device hadn't gone through all of its pieces with the FDA. Now we would say we have an approved and validated technology. And it has distinctly changed the type of use that people on the outside have about this. So we do have companies that are now talking to us more about what their product might be. Could it work in our technology, would it be appropriate for the compounds that they have, which is distinctly different than 2 or 3 years ago. I think it also shaped our thinking with regard to AZ-002, 8 and 9. We've learned a lot leading up to when we put everything on the shelf. But we've also learned a significant amount of knowledge over the review process, the regulatory process with ADASUVE. As we incorporated all of that thinking, as we thought about reinvigorating the pipeline, inputting products back into clinical and pre-clinical development, so it shaped us a lot. I mean, we had not ever previously talked about Parkinson's disease patients or RLS. So I think by using ropinirole, which is a bit of a twofer for us, as we get all the benefits of a compound going down 1 path in toxicology, 1 phase, 1 study; and we'll split it into 2 development programs when we hit Phase II, is a great way of thinking to leverage our single-dose platform, which we make, obviously, using ADASUVE.

Operator

[Operator Instructions] Your next question comes from Mr. Hemami.

Pooya Hemami - Edison Investment Research Limited

I just have a quick question. Going back a bit on the European product launches and in terms of, well, I should say, the units shipped, now there has been a trend, where it's been pretty -- where it's been decreasing each quarter since the launch, I think, in Q3 of last year. Can you give us any color in terms of where do you see that heading, let's say, in the future quarters? Because looking at the units shipped, it's hard to foresee a growth trend. Is there any color you can give us that will -- that, that gives the investor community more confidence of the growth in Europe?

Thomas B. King

Yes, so I think -- it's a great question, and I appreciate that, Pooya. And I think the challenge with Europe is that we have, I would say, a very lumpy inventory situation. There's 1 SKU that actually goes to Germany, Austria and Denmark. So that's one where, when we ship a pallet of 5,000, it can get used, and we'll ship another pallet. A pallet of 5,000 for the Nordic countries might be enough for a couple of years. A pallet for Romania; which is the only one with that particular SKU, could be good for a couple of years. Spain is just starting and right now, it's the only Spanish SKU. And it just got launched earlier this year. So part of the challenge is building inventory because we -- because of manufacturing and our agreement with Ferrer -- is we ship a large amount of product over there, and then Ferrer takes on that inventory before they spill it out to the hospital. So I think it masks some of the uptake, just because of the nuance of that. I would like to think that maybe in the next 3 to 4 quarters, as we get more of a sort of routine shipment, and demand continues to grow; which it is doing over there, we'll see a little bit more of a -- I think what we ship translates a little bit more into what's being used. A good example coming up though, another one, is that West France comes online later this year. It's 1 country, it's a bigger country, obviously. But again, it's the only country that will take that one particular SKU. And so I think some of the lumpiness that you're seeing is just a result of the way that inventory has to get built up, then bled off, then repurchased in chunks.

Pooya Hemami - Edison Investment Research Limited

Okay. Now that's very helpful. And can you give us any color as to, let's say, some of the other larger European markets, let's say, the U.K. or Italy, in terms of timelines for those?

Thomas B. King

Yes, so just in rough terms, looking for Italy in the first half of next year. The Italian market is one of the more aggressive ones on pricing. And so the European launch that Ferrer strategically considered was based on obtaining a high price, a good market price and sustaining it over a long period of time; which has been done in all of the countries, including France. The price is greater than EUR 70. So they followed that plan very, very well. Some of the countries where you might have a more rapid uptake are also countries that have lower pricing. And so a country like Italy, for example, was not in the first sort of 5 to 10 priority because it's a reference-based country, and the pricing discussions there are always very aggressive. U.K. is a unique situation for us. U.K., we do not have a nice approval, if you will. This product doesn't adjust quality-adjusted life years, and currently, that's basically the denominator that the U.K. uses for its reimbursement. We've talked with them at length about that, and we've been invited to participate in an update of the Guidelines for Treatment of Behavioral Emergencies. And we believe the potential of being included in that, sometime next year, may provide let's say, a more direct pathway into the U.K. But U.K. is held up not because of enthusiasm about the product or the opportunities, just because the pricing is difficult, and we're in a situation with an acute care product, that quality-adjusted life years is something that we just can't impact.

Pooya Hemami - Edison Investment Research Limited

I see. So the U.K. is something that might be a year down the line or so?

Thomas B. King

That's correct. That's correct.

Pooya Hemami - Edison Investment Research Limited

Okay. And just if I can do a follow-up, maybe a little bit on your new products that you discussed in terms of the pipeline. Because right now those -- the drug is currently available as an oral formulation. Can you tell us, just maybe in broad terms, the pharmacokinetics profile, if you think that, that Staccato ropinirole can have compared to any oral formulations that exist. And specifically, how that can be an advantage in Restless Legs or Parkinson's, in terms of how do you see the Staccato formulation really becoming a key advantage?

Thomas B. King

Yes. We know that the technology -- we've dosed 5 different drugs in humans over the course of our development of different compounds, and every one of them, absolutely, has a Tmax in 2 minutes or a little bit less than 2 minutes. So we highly expect that ropinirole will have exactly the same thing. It's going to have a peak plasma concentration in 2 minutes or a little bit less, which is going to lead into a very rapid onset of effect. More importantly, we saw in all the clinical trials with loxapine is that it doesn't matter who takes it, how they take it and what matter they take it, everybody gets the same dose. And so as a result of that, you're not only going to get a rapid onset, but you're going to get a very highly predictable dose. So everybody gets the same dose in a very simple sort of way. So if you think about both Restless Legs and the freezing episodes in Parkinson's disease patients, the onset of this will be faster than anything they've ever experienced. And we think that that's a significant clinical benefit. I mean, each of the patients have a different situation, they have -- the doses may actually be different, and if we were to project that Parkinson's disease patients actually may have a higher dose to affect the onset that they want. But we would expect a very rapid onset of the start of relief for these patients as a result of the intravenous-like pharmacokinetics that you have with Staccato.

Pooya Hemami - Edison Investment Research Limited

Okay. So it's really -- the time of benefit will be much, much quicker than what we get in the oral products, just as we have seen with ADASUVE.

Thomas B. King

Yes, I think not only time of onset, but I think the predictability of the response. I mean, oral drugs have a wide variability with patients because the uptake is so broad when you -- from an oral absorption. And I just think the density of response that you're going to get is going to be impressive, just like what we see with loxapine.

Pooya Hemami - Edison Investment Research Limited

Okay. And any update on the timing then, when you expect to have a Phase I?

Thomas B. King

We don't yet. We at least have to go through pharmacology, toxicology. Typically, in past experience, as any predictor, it takes us 12 to 18 months to go from an idea to a first dose in man.

Operator

That concludes today's question-and-answer session. We will now proceed with the closing remarks and or any additional remarks.

Thomas B. King

So thank you, operator. I just want to thank everyone again for joining us today. We look forward to updating you, both as we continue the global launch of ADASUVE, but as importantly, we're really excited about the reinvigoration of our product pipeline and look forward to updating you on the advancement of our new product candidates. Thank you again for participating today, and have a great afternoon.

Operator

Ladies and gentlemen, that concludes today's conference call. You may now disconnect, and have a great day.

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